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Small miners blast off in bull market

Richard Hemming

When Inca Minerals more than quadrupled in the past two weeks after releasing what could only be described as an indication that it had its foot on a big copper deposit, Radar knows that we are well and truly in the bull phase of the market cycle.

On Wednesday it announced the discovery of a copper bearing porphyry at 600 metres deep at its Chanape gold-copper-silver project in the Andes in Peru, about a hundred clicks east of the capital Lima.

The question, as usual, is whether there is more hype than substance to this minnow, which even after its rise has a market cap of only $36 million.

Radar appreciates that this was a good announcement, but the spike indicates investors were definitely getting ahead of themselves, as Trent Potter, resident rock specialist at Bell Potter says:

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"The company appears to have found a large-scale copper gold deposit, but we don't know whether it's economic. It shows that you can get a big share price rise out of a single hole.

"Twelve months ago, good news like this was viewed as bad or indifferent. You needed something really amazing to get any traction. That's what finally happened with Sirius last July - and it changed the sentiment of the whole market."

Sirius indeed. Investors are looking for another Sirius Resources (SIR), which climbed from about 6 cents in mid-July last year to as high as $3.28 less than four months later in early November.

The explorer's shares soared 679 per cent thanks to a single drill hole that intercepted nickel and copper in Western Australia's Fraser Range. Before the discovery Sirius had a market cap below $30 million and was looking down the barrel of going under. At $2.28 it now has a market cap of $505 million.

Inca Minerals (ICG) is still at the foothills of investor greatness. Its stock has climbed from 4 cents to as high as 17 cents, and closed yesterday just shy of 10 cents.

Porphyry is a type of igneous rock that hosts many of the world's giant copper and gold mines, indicating that Inca Minerals could be on to a big find.

But we don't even know that for sure! Inca doesn't even have the assays back yet, so it doesn't directly say anything about the metal content of the drill hole.

It does say that the sulphide bearing porphyry, which starts at 380 metres and sits under some other rocks containing modest grades of gold, copper and silver.

Furthermore, it is still "open" below the base of the hole at 600 metres, meaning it could go further – which Inca duly points out, adding a great deal to the hype:

“As porphyry deposits can be mineralised to depths well in excess of 1000m, it is necessary to follow up with deeper drill holes.”

Still, the share price has slipped from its highs, proving it an opportunity to get into what could be a massive copper deposit of the future. You have to be in it to win it.

Seeing Red

According to Red Metal's quarterly report released on January 23, its data on the mineralisation of its Maronan silver-lead-zinc project should be out any day, validating its hopes that it is onto the next "Cannington" mine owned by BHP, which is estimated to contain more than $25 billion in minerals.

Back in Peru

The Last Inca King, Atahualpa, will be rolling in his grave in Cajamarca, just up the road from Inca Mineral's operations. The Incan offered Francisco Pizarro and his cronies a large room full of precious metals in exchange for his life. It didn't work and he was strangled on a garrote (he was lucky not to be burnt alive) in 1533.

Those not invested should console themselves with what Atahualpa would say: "all the riches in the world won't help you if you're imprisoned by a Spanish conquistador."

Click here to access the fortnightly newsletter Under the Radar Report: Small Caps, edited by Richard Hemming. Go here for more Under the Radar articles.